Page 20 - ATR 3 2022 digital

just can’t build a lot of trucks. … But, as
we just talked about, that has not pre-
vented the industry from adding head
count, and it’s not prevented the indus-
“YOU’RE SEEING A LOT OF DIFFERENT WAYS FOLKS try from adding capacity,” he said.
Atkins said there has been a lack
ARE ATTACKING [THE QUESTION], HOW DO WE HELP of investment among large and midsize
CONSOLIDATE THE TRUCKING INDUSTRY WITHOUT fleets in the long haul trucking sec-
INVESTING IN TRUCKS? AND THAT’S GOING TO BE A tor. Companies have been preferring
BIG THING OVER THE NEXT FIVE YEARS, WE THINK.” regional routes and dedicated contracts.
The trend has made the industry more
volatile and susceptible to swings in the
–JACK ATKINS, STEPHENS’ SENIOR RESEARCH ANALYST AND economy.
MANAGING DIRECTOR OF TRANSPORTATION EQUITY RESEARCH Looking ahead at “megatrends”
that will affect the industry, he said
freight platforms will grow in impor-
tance. More and more big carriers will
try to grow their logistics business so
they can pull more freight without
sales far above the trend. Americans are in 2022. That sector has seen steady hiring more drivers and buying more
still spending the stimulus, but sales growth over the past 12 years as it trucks.
could return to a normal level, leading recovered from the financial crisis of “You’re seeing a lot of different
to more balanced inventories. the late 2000s, but it probably will slow ways folks are attacking [the ques-
Among the risks to the freight because of higher interest rates and tion], how do we help consolidate the
economy in 2022 is that the inventory building costs. trucking industry without investing
restocking cycle will end. However, it’s On the other hand, auto produc- in trucks? And that’s going to be a
yet to be seen if there will be an over- tion could increase. Atkins recently was big thing over the next five years, we
stock phase followed by a clearance having his oil changed at a dealership, think,” he said.
phase like there was in 2019. and there were no new cars on the Other trends include Class 1 rail-
In December 2021, Stephens did lot. Historically, manufacturers have roads’ increasing preference to work
a survey of its shipper contacts to produced 16–18 million cars a year with asset-based providers for intermo-
determine how long this inventory since the financial crisis. This year, it’s dal shipments. E-commerce will con-
restocking cycle could continue. Forty- expected to be 15 million. If the supply tinue to impact the economy. The trailer
four percent expected a more balanced chain issues are resolved, there could be shortage will continue to be a major
inventory position within the next 30 an upside. Likewise, the industrial econ- concern, while autonomous vehicles
days, while 16% said it would occur in omy is enjoying a healthy expansion will become more common and will
1–3 months and 13% said it would hap- that likely will continue for some time. apply to certain routes over the next
pen in the next 4–6 months. Shippers five years.
are saying the same thing on public INDUSTRY TRENDS ESG — environmental, social and
conference calls. Truck employment has recovered corporate governance — will become
Atkins said e-commerce levels, from the pandemic and is now well increasingly important. Shippers feel
after spiking during the pandemic, are above January 2020. That number greater pressure to consider such issues.
normalizing to the trend. E-commerce includes everyone who works for truck- Larger shippers first will ask carriers to
was 13.6% of all retail sales in the ing companies. When truck employ- reduce carbon emissions because their
fourth quarter of 2020 and then was ment falls, it will signal that carriers are stakeholders are pushing them that
12.9% of all retail sales a year later. starting to cull capacity. direction.
Companies like UPS and FedEx are Capacity today is above where it Atkins also expects more near-
saying they are seeing a slowdown this was in 2019 at the prior peak. What’s shoring so shippers aren’t so vulner-
year, Atkins said. Amazon recently different is that it is difficult to pur- able to the fragile global supply chain.
said on its conference call that it has chase a new truck and a new trailer, They’ll bring more production to North
overbuilt capacity. and probably will be through 2023. America, probably Mexico, which means
Among the various sectors of the “One of the things that’s going to more freight will be coming north from
economy, Atkins said housing starts are keep a little bit of a lid on too much across the border. ATR
forecast to grow 2.6% year over year capacity flooding in is the fact that we

20 Issue 3 2022 | ARKANSAS TRUCKING REPORT